Iran Moves to Authorize Cryptocurrency Mining With New Pricing Scheme

Samuel Haig

According to a Financial Tribune report that was published on July 21, Iran proposed a new pricing scheme for cryptocurrency miners, which will be based on comparable tariffs in place for electricity imports.

The announcement was made on Sunday by Homayoon Ha’eri, Iran’s Energy Ministry deputy for power and electricity, who noted that the scheme is still awaiting final approval from the Iranian cabinet. Ha’eri did not reveal the price scheme, however, indicated that market factors including energy prices would drive pricing.

Iran Expected to Embrace Cryptocurrency Mining

On July 10, the governor of the Central Bank of Iran (CBI), Abdol Nasser Hemmati announced the Iranian administration is preparing to authorize cryptocurrency mining, despite the lack of an existing regulatory apparatus legitimizing the activity in Iranian law.

Hemmati indicated that the government had approved aspects of an executive law that would permit cryptocurrency mining, following an increase in the prevalence of mining owing to cheap electricity prices.

The CBI governor specified that the pricing scheme for electricity provided to miners “should be done based on the price of electricity for export,” adding: “what’s more important is that these mined currencies should be fed back to the national economic cycle.”

Iran currently exports electricity to neighboring countries for roughly between $0.07 and $0.10 per kilowatt-hour, however, industrial and agricultural operations receive subsidized electricity at approximately $0.05 per kilowatt-hour.

On July 9, reports indicated that Iran’s Energy Ministry had proposed a rate of $0.07 for each kilowatt-hour consumed by cryptocurrency miners.

Cheap Electricity Attracts Cryptocurrency Mining Operations to Iran

Cheap electricity has reportedly attracted miners to Iran since at least December 2018, with various news outlets highlighting the increasing presence of Chinese miners in the country. The story quoted a statement from a Chengdu-based start-up that it had deployed 2,000 mining units to Iran.

On July 6, Iran’s Minister for Communications and Information Technology, Mohammad Javad Azari Jahromi, relayed rumors of private Chinese mining operations having a presence in Iran, stating

There is no evidence of the activity the Chinese in Iran although I have heard it unofficially.

During June, Iran’s power generation and distribution company, Tavanir, reported that the country’s electricity consumption between May 22 and June 21 had increased by 7% compared to the same period during the previous year. A spokesperson for Iran’s Ministry of Energy attributed the bulk of the “unusual increase” to “the activity of bitcoin miners.”

The spokesperson, Mostafa Rajabi Mashhadi, estimated that the power required to mine a single bitcoin could supply two dozen residential units for an entire year. Mr. Mashadi warned that authorities would crackdown on the unsanctioned usage of electricity for cryptocurrency mining, stating that “bitcoin miners will be identified and their electricity will be cut.”

In late June, Iranian state television reported that two mining farms located in abandoned factories had been shut down, resulting in the seizure of approximately 1,000 mining rigs.

Bitcoin Mining Difficulty Increases to Highest Level Since January 2018

Siamak Masnavi

According to data from Bitcoin mining pool BTC.com, yesterday (June 16), Bitcoin's mining difficulty took a 14.95% jump, as the result of which it reached its highest level since January 2018.

The Bitcoin network has been designed with the aim of a new block of transactions being generated on average every ten minutes. The time it takes to mine a new block is controlled by a parameter known as the "mining difficulty" and the algorithm responsible for adjusting it is called the "difficulty adjustment algorithm" (DAA). 

Bitcoin's DAA adjusts the mining difficulty parameter every 2016 blocks (roughly every two weeks). That's why since the beginning of the year, there have been 12 difficulty adjustments to Bitcoin's mining difficulty:

BTC difficulty changes - 17 June 2020.png

As you can see, since the Bitcoin halving on May 11 (when the block mining reward got reduced from 12.5 BTC per block to 6.25 BTC per block), there have been three adjustments to Bitcoin's mining difficulty:

  • May 20: Bitcoin's mining difficulty decreased to 15.14 trillion (a 6.00% change)
  • June 4: Bitcoin's mining difficulty decreased to 13.73 trillion (a 9.29% change)
  • June 16: Bitcoin's mining difficulty increased to 15.78 trillion (a 14.95% change)

This latest adjustment to Bitcoin's mining difficulty is the largest one this year, and it is the largest difficulty increase in almost 2.5 years. Back in January 2018, we had two difficulty increases of 15.36% and 16.84% on January 13 and January 25 respectively.

Currently, Bitcoin's mining difficulty and average hash rate are very close to the levels they were before the halving, but the daily block mining rewards are now 900 BTC per day instead of 1800 BTC per day.

Ethan Vera, Co-Founder and Head of Finance of the Luxor Technologies, which is the owner and operator of crypto mining pool Luxor Mining (launched in Janujary 2018), told Coindesk:

“With the value of hashrate set to decrease to $0.075 cents per TH/s, not many of the existing, old-gen equipment will turn back on. New hashrate coming onto the market will likely be driven by new-gen and high-efficiency machines.”

And Kevin Zhang, Chief Mining Officer at Greenidge Generation, told Coindesk:

“Despite limited price action, we expect the hash rate to continue rising in the near term as more older generation miners go offline and newer generation ones come online."

Featured Image by "SnapLaunch" via Pixabay.com